CLIENT LOGO INTRODUCTION 1 Overtype the hash (#) with your section number To insert more Divider Slides, copy and paste this one
CB Richard Ellis | Page 4 INTRODUCTION The use of partnerships and the participation of private sector investment have been key components in the continuing evolution of the science park sector. Why is this the case – what does each party gain? How are partnerships created? What are investors looking for? Supporting market context. Ingredients for success. Conclusions. To move between headings, body text and bullet levels, use the indent buttons NOT the bullet button
CLIENT LOGO What does each party gain? 2 Overtype the hash (#) with your section number To insert more Divider Slides, copy and paste this one
CB Richard Ellis | Page 6 Benefits for each party Owner (Academic, Corporate or Public Sector) New Partner (Investor/Developer) Contributes: Land, tenants & income Knowledge Planning consent Scientific Networks People Contributes: Access to funding sources Development expertise Marketing tools Commercial attitude Portfolio efficiencies Resources Benefits: Accelerated program Delivery vehicle Outsourcing opportunity Cash release & share in upside without loss of control Benefits: Exposure to sector (superior returns, specialist asset) Returns through active management Portfolio opportunity Joint benefits: Optimal marketing team, shared risks and benefits, clear vision and timescale.
CB Richard Ellis | Page 7 Harwell example Find a lasting solution Allow UKAEA to dispose of surplus land whilst retaining stake in future Secure development expertise and establish credible development vehicle that can grow with site Achieve alignment with STFC vision for their part of campus Satisfy needs of stakeholders – provide a solution that balances imposed constraints with commercial reality Allow outsourcing and downsizing of UKAEAs RE resources Maximise practical benefits to UKAEA within constraints of Government funding arrangements Entity must be a private sector vehicle To move between headings, body text and bullet levels, use the indent buttons NOT the bullet button
CLIENT LOGO How are partnerships created? 3 Overtype the hash (#) with your section number To insert more Divider Slides, copy and paste this one
CB Richard Ellis | Page 9 Harwell JV Deadlocked 50:50 Public/ Private limited partnership JV Each partner itself a limited partnership – PUBSP – between UKAEA + STFC – PSP – Goodman Allowed Goodman to use more efficient structuring on its side of JV Land parcels transferred by long ground lease on a drawdown basis Additional land restored by NDA transferred by same process
CLIENT LOGO What are investors looking for? 4 Overtype the hash (#) with your section number To insert more Divider Slides, copy and paste this one
CB Richard Ellis | Page 11 What are Investors looking for? Investors prefer to participate in parks that display the following characteristics: Located in a well established R&D cluster (demonstrating the well established factors for successful parks) Local market for R&D property is active and does not require support of public subsidy Whole park under single ownership/management structure to facilitate active management and limit internal competition Vehicle is a private sector entity that can be geared and where equity stakes can be traded. To move between headings, body text and bullet levels, use the indent buttons NOT the bullet button
CB Richard Ellis | Page 12 Success Factors To move between headings, body text and bullet levels, use the indent buttons NOT the bullet button Factors 1Strong Science Base (academic/public/commercial) 2Entrepreneurial Culture (evidence of successful IP commercialisation, growing companies etc 3Growing company base across lifecycle 4Ability to attract and retain staff (across full spectrum) 5Strong demographics (existing pool of expert labour) 6Property and Infrastructure (specialised and generic) 7Effective networks (to promote open innovation, partnering etc) 8Existence of support services/network 9Availability of finance (across full spectrum) 10Supporting policy environment/govt support
CB Richard Ellis | Page 14 R&D Real Estate Market Characteristics The bad news: Industry rationalisation and generally poor economic conditions have combined to create a worldwide glut of surplus R&D assets. UK based assets face global competition because R&D occupiers increasingly consider/compare locations on a regional/global basis. Supply of R&D property in the UK stands in excess of 10m sq ft across the full size range from incubator/starter units through to full scale R&D campuses. Supply will increase further if sites that are currently being discretely marketed as ongoing concerns reach the open market. The good news: The R&D sectors desire to be leaner and more agile and to increase partnering, external interaction and open innovation is directing demand for specialist accommodation to established R&D clusters. Science Parks are well placed to benefit from this trend.
CB Richard Ellis | Page 15 Large Campus Closures/Downsizing ImageLocationFuture Use Terlings Park, Harlow Residential New Frontiers Harlow Uncertain? South Eden Park Beckenham Residential/ mixed use. The Frythe Welwyn Residential ImageLocationFuture Use Charnwood Loughborough Existing use sale? Newhouse Lanarkshire Existing use sale? Sandwich Kent R&D? Approx 6,000 jobs/7m sq ft
CB Richard Ellis | Page 17 CHALLENGES Multiple land owners/complexity Multiple stakeholders (UKAEA, STFC, MRC, NDA, HPA, ShE, DIUS DBERR, SEEDA, CNC, OGC, HMRC, CO, BBSRC, NERC, EPSRC, Local Govt and Parish Councils) EU regulated procurement regime Ex nuclear research site potential contamination perception issues Energy Act 2004 Conflict between vision and commercial reality Governance vs Financial Return Weakening market conditions
CB Richard Ellis | Page 18 KEY LESSONS LEARNT Constant engagement with stakeholders Get direct sign-off from senior management Win over those against Agree vision, objective and commercial proposition and dont change them Keep timeline but dont force pace Soft market test solutions before agreeing final structure Dont rush to market – incomplete propositions waste time and kill interest Get comfortable with returns timescale – JVs can be slow burners Use a law firm with specialist expertise Dont over constrain or over-complicate JV. – But JVs are complicated.
CB Richard Ellis | Page 19 THE OUTCOME A true partnership A deliverable Vision An exciting commercial opportunity A highly incentivisised private sector partner A thriving environment for public and private sector science An optimised environment for technology transfer A maximised opportunity and financial return for the UK taxpayer
CB Richard Ellis | Page 21 Conclusion Small but committed and expert group of private sector investors are participating in science parks Opportunities for both parties to benefit from participation Flexibility is required to adopt a more commercial approach whilst protecting the wider vision of the park. Private sector investors will only participate in investable parks Expectations need to be aimed at medium to long term success Evolving R&D model favours open science parks over closed campuses – but only those that satisfy key success factors.